The Free Market Delivers the People its Gold Money

As W. Clement Stone once said: "Events tend to recur in cycles." We see evidence
of this in nature, in many types of mathematical numbers, and through the business
cycle. A number of economists, analysts, and consumers claim that a return
to the gold standard, to their "honest money" as they call it, would insulate
them from the problems they see in our conventional paper-based currency. Financial
leaders dismiss metal-backed currency. A return to gold standard will not occur
on their watch. However this debate doesn't matter anymore because these people
are getting what they want. Instead of waiting on governments to legislate
them their gold-money - the market is providing it for them.

Since the early 1970's when the US separated gold from its currency, experts
and citizens have been yearning for a return of the yellow metal to their money.
Banking and government agencies insist paper money is the right way forward.
Instead of bending to these leadership elites "honest money" folks are finding
that The Internet is the perfect place to find like-minded individuals with
whom to do business in gold.

Organizations such as e-Gold, Phoenix Dollar, Liberty Dollar, and GoldMoney
have sprung up online to offer an easy way for consumers to buy and transfer
precious metals. Consumers have responded by giving them their paper money
for a chance to transact in gold. Members can purchase gold, silver and other
metals at competitive market prices and the organization stores their metal
for them offsite. Using an online web interface members can send and receive
payments of gold/silver as well as request delivery of their precious metal.
The growing gold reserves of these online currencies speak volumes for demand.

e-Gold, for example, claims to have attained a circulation larger than Canada's
official gold reserves, web traffic exceeding etrade.com, and processes about
$10million of user-to-user payments everyday1.
These are certainly impressive numbers - evidence these "honest money" folks
really are committed to their ideal. A growing number of merchants who use
these new currencies now transact almost exclusively with them. However, the
shift to buying and making payments in gold is also gaining ground offline.

The Liberty Dollar is an initiative to put the value of a commodity such as
gold & silver back into the pockets of American consumers2.
On their website the Liberty Dollar makes a compelling case for moving to a
commodity-based currency as it contrasts the growing US Debt with the declining
purchasing power of the US Federal Reserve Note. The Liberty Dollar is similar
to its counterparts as it allows online payments to be made. However its currency
is unique because Liberty Dollar members make day-to-day purchases with gold & silver
certificates and medallions. Liberty Dollar merchants claim that the powerful
incentive to accept this currency is the unmistakable attractiveness to holding
real wealth versus ink and paper. This renaissance of holding gold is not isolated
to Americans but also to the directors of central banks.

Russia and China are increasing their country's gold reserves. In 2005 Russia
announced it was going to double its gold reserves3.
Asian central banks, which hold 2.6 trillion US dollars4,
are also being hailed as the next big buyers of gold. China, for instance,
attracted international attention as it doubled its gold reserves to 600 tonnes
between 2000 and 20025.
If this were not enough Chinese economists are now calling for the government
to quadruple its gold reserves to 2,500 tonnes6.
Why are these countries increasing gold reserves? Why not simply continue to
buy the world's great US Dollar?

China has been selling US Dollars noting that "The general trend for the U.S.
dollar is continuously weakening".7 As
China moves their wealth from dollars to gold it can protect itself from the
faltering dollar and take advantage of a rising price of gold. In 2003 the
oracle of Omaha, Warren Buffet, put Berkshire Hathaway's assets in a defensive
position by purchasing foreign currencies for the first time in its history.
He cited the transference of US net worth overseas for the basis of his actions8.
The US Dollar's fall from grace means commodities, such as food, are susceptible
to price increases. Making matters worse is our changing climate.

Weather changes impact our ability to grow food. As food prices depend on
global availability a drop in production has an immediate impact on cost. In
early October 2006 US Wheat prices hit a 10 year high because "wheat harvests
from Australia to Argentina, Europe and North America have been affected by
drought, heatwaves and, in the case of Ukraine, infestation from the Eurygaster
beetle."9 In
light of this paying for a commodity with a commodity, like gold, will surely
make more and more sense.

Many consumers around the world hope their governments respond effectively
to the changing climate and the problems facing the world's reserve currency,
the US Dollar. Unfortunately ordinary citizens assume they have little political
power except every four years. Only through a government mandate, they will
claim, can things be made possible. Because a growing number of people across
the world recognize that their economic vote can be much more powerful than
their electoral vote - gold emerges once again as a currency for all.

Geoff Whittington has a keen interest in currencies and
their ability to drive economies. Geoff operates his own software company,
Fireball Technology Group (http://www.fireballgroup.com),
and is building a growing online directory of local experts from across United
States and Canada at http://www.thelocalguru.com.